The new draft Land Acquisition and Rehabilitation and Resettlement Bill, if implemented, will replace the archaic Land Acquisition Act, 1894. The draft proposes higher compensation for land owners as well as increase in the solatium amount. The proposal is to increase the current level of solatium to 100% of the total market value from the existing 30%, provided by section 23 (2) of the existing Land Acquisition Act.
What is solatium?
It is an amount or consideration that is given over and above the compensation for land. Solatium basically compensates for a person’s emotional suffering from loss of asset, death due to disaster or natural calamity.
In terms of real estate, the loss of asset happens when the government acquires a private property or land to develop an infrastructure or residential project. In most countries, ownership of land is also seen as a matter of family history and pride. It is considered that the market price given to the land owner when his land is acquired may not be appropriate. Thus, an additional amount is given as solatium to compensate the emotional loss of the asset.
How much is it?
Solatium is a percentage of the market value of the property. This rate is fixed by the government.
Globally, solatium is usually higher for residential dwellings and land in use.
Also, there are countries where solatium is not given in terms of a percentage of the market value but is a pre-fixed amount. Australia and New Zealand fall in this category. However, the current inflation is taken into account at the time of payment.
Lack of standards
Absence of any standards in assigning solatium leads to confusion. In several parts of the world, the rate of solatium is considered low and inappropriate. In fact, solatium given in India is one of the highest in the world. In several developed countries, including parts of Europe and the US, solatium is in the range of 3-10% of the market value. For example, in the UK, solatium is around 10% for acquisition of a residence.
In India, various state governments have brought their own amendments on solatium. For example, in Andhra Pradesh, an owner whose land has been acquired can claim an additional patch of land of a value equal to that of the solatium.
If you are a land owner and your land is being acquired by a government agency, a solatium is due to you. Check the market value of your land and the exact regulation on solatium in your state before settling for a deal.